Secured borrowing popularity continues to soar
According to data from the Bank of England, the popularity of secured borrowing continues to soar, as Brits take advantage of the rising value of their properties and use it to borrow money with lower interest rates and longer repayment periods.
Secured loans are generally secured against the home, and are based upon the level of equity in the home, which is the market value of the property minus any loans or mortgage already secured against it. With the value of properties in the UK soaring over recent years, many have found themselves with far more equity in their homes than they expected, and this has given many people the ability to take out large loans over longer periods and at lower interest rates.
In the final quarter of last year secured borrowing rose to over £14.5 billion, which reflected an increase of around £2.5 billion on the revised figure for the quarter. The figures were at the highest since 2004, and in many cases borrowers were taking out the loans to add even more value to the property by carrying out home improvements. A third of homeowners would carry out DIY to further increase the property value according to Yorkshire Bank, with a further seventy percent expecting the value to rise within the next year.
Gary Lumby, speaking for the Yorkshire Bank, stated: "Some DIY projects, like fitting new kitchens and bathrooms or installing double glazing, can be costly. The sensible option for many could be to spread the cost of these projects by releasing equity and adding it on to the total mortgage repayments."
Consumers that do wish to take out a
secured personal loan against the equity in their homes are advised to shop around in order to find the best interest rates and deals, as these can vary quite significantly from one lender to another.
Tom Smith
11th April 2007
More Information:
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How have Britons financed the billion of pounds spent on home improvements this year? Mostly through personal loans, although other forms of payments have been used as well.
- Have You Got A Toxic Loan?
A secured loan can seem like a dream come true, especially for someone with a poor credit rating. Finally, there's a way to afford that new car, expensive holiday, wedding or other family treat.
- For those with good credit, a mortgage in decent standing, and a relatively (depending on the bank's definition) sizeable difference between a home's worth and the balance of a mortgage, a home equity line of credit may be a good option for those needing a loan
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It's very easy to sign mortgage papers and forget all about the details of the loan. As long as the monthly payments are made, many people don't give their mortgage much thought. However, as the economy fluctuates, mortgage rates do also, and substantial cost savings over the life of mortgage could be realized by refinancing.
